Question

Many large universities rent out parts of their campuses to conference groups during the summer because such groups cause little damage, require little staff attention, and bring in large amounts of income. A university’s decision to rent its campus to a conference group is most clearly based on
a.the idea that price and quantity selection is a single decision.
b.the principle of decreasing returns to scale.
c.marginal analysis.
d.average cost considerations

Answer 1

Answer:

The answer is C. marginal analysis.

Explanation:

Marginal analysis entails evaluating the additional benefits to be derived from an activity to additional cost. It involves a cost-benefit evaluation of the decision.

In the question, the additional income is large amount of income while the additional cost is very small(it requires little staff and little damage). So, the benefits outweigh the cost.

So the university’s decision to rent its campus to a conference group is clearly based of marginal analysis.